This is investors' reaction to unexpected signals coming from the White House, suggesting the possibility of a breakthrough in the conflict with Iran and a chance to restore the flow of transport through the strategic Strait of Hormuz.
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On Wednesday morning, the price of a barrel of Brent crude oil dropped by $1.89 (1.7%)reaching the level $107.98
A similar trend was observed in the case of American WTI crude oil, which became cheaper by $1.83 (1.8%)falling to the level $100.44. This is a continuation of the downward trend after Tuesday's session, during which prices dropped by nearly 4%.
Donald Trump suspends Operation Project Freedom
The direct cause of market optimism is the statement of US President Donald Trump. He informed about the short-term suspension of the military operation aimed at escorting ships through the Strait of Hormuz, justifying this with progress in talks on an agreement with Tehran.
““We mutually agreed that while the blockade remains in full force, Operation Freedom Project (…) will be paused for a short period of time to see if the agreement can be finalized and signed.” – wrote Donald Trump on social media.
The president did not provide details of a possible arrangement, and Iran has not yet commented on these reports. Despite the suspension of the escort, the US Navy continues to blockade Iranian ports.
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The market is waiting for the barrels to be “released”.
Experts point out that the very announcement of de-escalation is crucial for the markets, as it gives hope for the release of the ships trapped inside the Persian Gulf. However, Anh Pham, senior oil specialist at LSEG, was quoted by Reuters as saying that it will take a long time to return to full normality.
“This signals a potential de-escalation and fuels hopes for the release of trapped individuals, which could gradually restore supply to the market. However, prices remain elevated as the prospects for a peace agreement remain uncertain,” Pham said.
It is worth recalling that just a few days ago, tensions were at their peak – the US military reported the destruction of Iranian boats, drones and cruise missiles while trying to move merchant ships out of the region.
The long-term blockade of the Strait of Hormuz has had a significant impact on global gas reserves. According to the latest data from the American Petroleum Institute (API), US crude oil inventories fell for the third week in a row.
